The Mystery of China’s Labor Shortage

Structural unemployment – a mismatch between the skills workers have and those sought by employers – doesn’t fully explain the phenomenon. To answer the question, one needs to consider a combination of factors that symbolize the changing landscape of China’s labor force and modern society in general.

Firstly, there is indeed a structural problem here and it’s twofold: On the one hand, many of the outstanding job vacancies are due to a lack of skilled workers as segments of China’s export industry crawl up the value chain; but on the other hand, some factories complain that lots of the new-generation migrant workers aren’t interested in tough basic jobs like construction any more.

The lack of interest in such low-paying, physically demanding work partly stems from the second factor – the growing income at home for these farmers. Much to its credit, the Chinese government has consistently put developing agriculture and feeding the rural population (which measured 727.5 million in 2007) as its top priority over the years. An incessant stream of favorable policies, such as scrapping burdensome taxes and forceful market intervention, have increased rural incomes to the extent that farming is becoming more rewarding than cleaning skyscraper windows in some places.